Singapore is a financial hub, but we rank as one of the lowest in financial confidence. How do we rectify this?
Singapore has a stalwart financial reputation, considered the fourth most competitive financial centre in the world according to Global Financial Centres Index 18. Despite this, the same index ranks Singapore in the bottom three of 19 markets in confidence in financial strategy. What is causing this low ranking?
In a recent survey by the Financial Planning Standards Board (FPSB) and published by the Financial Planning Association of Singapore (FPAS), the desire by Singaporeans to get the finances on track is there. There is catch: Singaporeans are not sure whom to trust.
Says Steven Ong, Chief Executive Officer of FPAS, “The global financial crisis in 2008 resulted in a lot of negative publicity for investment advisers and banking professionals.” Ong says that many suffered during this downturn, and the blame was laid on irresponsible advice from financial professionals.
Ong further points to a sense of detachment between clients and financial professionals. “Our survey shows that higher frequency of review sessions correlated with higher trust levels between client and adviser. Therefore meeting and exceeding clients’ expectations of review sessions is vital to building confidence in financial advisors.”
Right now, the survey shows that when seeking financial advice, the most trusted source for Singaporeans is family members, 53% out of 1,000 respondents, compared to 45% for financial planners.
Results also show that 72% of Singaporeans are unsure of whom to trust when discussing financial issues.
Cutting through the paperwork
The reason why trust in professional financial planners is considered so important is that for many Singaporeans, there is a great deal of confusion when it comes to taking the step towards savings and management.
The survey shows that there are several barriers to entry that are deterring individuals from taking the steps necessary to get effective financial planning. Aside from not knowing who to trust, there is a concern of excessive paperwork, which 69% of respondents felt turned them away from financial planning.
Similarly, many respondents felt that the nature of financial planning is in itself a confusing affair (68%), or that the task itself is too complex for them to follow (66%).
The interest is there
As compared to the rest of the world, Singaporeans are aware of the need to manage finances for their future. 58% of Singaporeans for example show an interest in retirement planning services, as compared to the global average of 50%.
The numbers show a similar story for investment planning and budgeting (48% and 42%), again going higher than the global average (38% and 36% respectively). So the real issue is not a lack of interest in saving and financial planning, but a lack of trust in getting sound financial advice.
Ong understands that rebuilding consumer trust in financial matters is no easy task. “Trust cannot be built in a day,” he says, “and FPAS continues taking steps towards building this much-required trust.”
Getting certified advice
One solution that FPAS is following to bring back trust and confidence is the introduction of the Certified Financial Planner tm certification (CFP). Right now, this is unknown to the majority of Singaporeans (42% says the survey), but Ong believes that this is a step in the right direction.
“CFP professionals invest, on average, three to four years to get this certification and continually upgrade themselves in line with CFP requirements,’” says Ong. He says that on average professionals with this certification spend 50% more time with their clients than professionals who do not have the certification.
“There are about 900 CFP professionals in Singapore, among approximately 20,000 to 30,000 financial planners in the country.” This small number of certified professionals performed higher than their counterparts in all aspects of the survey. This certification is accredited by the Institute of Banking and Finance (IBF), and is globally recognised.
Aside from the use of certification, Ong says that FPAS are looking at future initiatives to increase confidence in financial planners, including consumer outreach.
“FPAS regularly runs Consumer Outreach programs to educate consumers on financial literacy and help them to understand critical financial planning issues,” says Ong.
“For example, we are working with National Trades Union Congress (NTUC) and Singapore Exchange (SGX) in our upcoming event happening on 23 Jan 2016, 9am to 3pm, in the NTUC Auditorium, on Investment towards Retirement.”
Ong also mentions plans to work closely with organisations, such as the Monetary Authority of Singapore (MAS) and MoneySense to further educate the population on financial matters.
Parting Words of Advise
In light of the results of the survey, and the continued insecurity posed by the Chinese market and the interest decisions of the financial bank, there are three pieces of advice that FPAS wish to give the population.
Pay off debts sooner, live below your means, and do not speculate in the stock market.